FTSE Russell’s Kristen Mierzwa says tokenized indices face liquidity hurdles (2:38)
Tokenized versions of traditional stock indices could become mainstream within the next 3-5 years, according to Kristen Mierzwa, the global head of digital asset business at FTSE Russell.
Speaking with TheStreet Roundtable host Jackson Hinkle, Mierzwa said the financial industry is already exploring how to bring index exposure fully on-chain and potentially allow investors exposure directly rather than through traditional exchange-traded funds (ETFs).
When asked whether investors may eventually purchase tokenized indices directly instead of ETF products, Mierzwa said, “Absolutely, that's where it's going.”
Related: What is tokenization? Explained
Why asset managers still matter
Today, investors don’t directly buy the S&P 500 index itself. Instead, they purchase ETFs or other pooled investment vehicles that track it. Asset managers perform critical behind-the-scenes functions, including custody, dividend distribution, tax processing, and corporate action management.
Mierzwa emphasized that these operational layers are often overlooked but essential.
“Why do you use an asset manager? Because they're doing a lot of functions that are very important.”
She pointed to dividend payments, foreign tax reclaims, and custody management as key services that ensure investors receive the full exposure of the index.
How tokenization takes up corporate action challenges
In a tokenized system, those same processes would need to be automated and embedded into blockchain-based infrastructures.
One of the most complex hurdles to tokenized indices involves tokenizing corporate actions such as stock splits, mergers, or dividend adjustments.
"If there's a split, how does that kind of get all handled?" Mierzwa said.
She underlined the importance of getting complex corporate actions right.
Ensuring that index token holders automatically receive dividends, stock splits, and other adjustments remains a significant technological and regulatory challenge.
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Discussions underway but liquidity yet to be addressed
While tokenized index products are not yet mainstream, Mierzwa revealed that discussions are already underway.
“We're already talking to people about tokenizing our indices today,” she said.
However, she noted that current blockchain ecosystems often operate in “walled gardens,” where tokenized assets may exist but lack deep secondary-market liquidity.
“You can tokenize something, there’s one investor that buys it, but there’s no liquidity in the secondary market for that,” she added.
Additionally, compliance requirements such as Know Your Customer (KYC) and Anti-Money Laundering (AML) norms must be addressed before broader adoption can occur and investors can buy tokenized indices.
Tokenized indices will be mainstream in 3-5 years
When asked whether tokenized index investing could arrive as soon as 2026, Mierzwa suggested the shift would take slightly longer.
“So we're there today in terms of proof of concept,” she said.
“But when do I think it will go mainstream? It's probably going to take another 3-5 years.”
Despite the wait, she characterized that timeline as relatively short given the scope of change.
If successful, tokenized indices could mark a major evolution in how investors access diversified market exposure, potentially reshaping the role of ETFs and traditional asset managers in the digital asset era.
Related: What are tokenized stocks? Explained
